Public Procurement Reforms: An Analysis of the Drivers of Procurement Irregularities in Ghana

May 2, 2022

Public procurement is a developmental tool used by governments to implement socio-economic programmes. Apart from interest payments and compensation, expenditure plans for goods and services, capital expenditure, and grants to other government institutions are effected through public procurement. This represents an average of about 11.6 percent of GDP in 2016 and about 10.4 percent of GDP in the 2022 expenditure plans of government. The socio-economic impact of these spending patterns depends on the efficiency of the procurement system to ensure value for money, transparency and accountability.

Notwithstanding the numerous reforms to Ghana’s public procurement system, it remains vulnerable to political interference, and the overall weaknesses in the public financial management system. The current institutional framework centralizes key procurement decision making (single sourcing and restricted tendering) around the PPA Board, exposing the procurement process to political patronage and clientelism due to the excessive influence of the executive arm of government in the appointments of PPA board members. Similarly, the entity level is susceptible to political interference as majority of the members of the tender review committees/boards are political appointees or public servants. The lack of representation of demand-side accountability actors attest to the low appetite for accountability in the public procurement system. Additionally, the weak monitoring and oversight of the PPA is worsened by the low utilization of the Ghana Electronic Procurement System (GHANEPS) by public institutions. The PPA reports that about 76 percent of the 335 public institutions enrolled do not use the GHANEPS.

The last decade has been marked by a steady rise in procurement related irregularities by MDAs and PBCOSI. The procurement irregularities reported by the AG for MDAs have increased by about sixteen times from GHC684,325 in 2010 to GHC10,667,174.60 in 2020. Over the same period, PBCOSIs have recorded about an 800 percent increase in procurement related irregularities from GHC1.4 million in 2010 to GHC846 million in 2020, representing about 42 percent of additional healthcare spending of GHC2 billion in 2020. The sharp rise in procurement irregularities in 2020 can be attributed to the effect of the Covid-19 pandemic on procurement plans, which led to relaxed requirements to facilitate the purchases of critical needs.

Open competitive tendering is the common method of procurement; however, it is the least preferred method for high financial value transactions. From the 339 transactions of 11 MDAs whose combined irregularities since 2010 constitute about 97 percent of the gross irregularities, 181 of the transactions were procured through open competitive tendering, however, GHC18.7 billion of the total financial value of GHC19.9 billion of the 339 transactions were procured through single sourcing. In the case of PBCOSI, open competitive tendering constituted 429 out of the total 832 transactions. Nonetheless, GHC7.80 billion and GHC3.12 billion out of the GHC14.04 billion of the gross financial value of the 832 transactions were procured using restricted tendering and single sourcing respectively. Single sourcing and restricted tendering appear to be the most preferred method by public institutions for high financial value contracts. Additionally, most of the reported procurement irregularities by the AG are linked to single sourcing and restricted tendering, indicating the vulnerabilities associated with non-competitive procurement methods. Crucially, the irregularities associated with these two methods are caused by failure of public institutions to comply with the requirement of the PPA laws.

A major threat to the public procurement regime is the poor enforcement of sanctions in the procurement law, resulting in tolerance for abuse of the procurement laws. The AGs report is replete with numerous abuses of the procurement laws, however, there is little political will and interest to enforce the sanctions in the PPA Act. The weak political will to exact accountability by enforcing the laws are reinforced by the conflict of interest by politically exposed persons involved in procurement of public institutions. Essentially, the Attorney General’s loyalty to the executive makes it practically impossible for him to prosecute culpable ministers of state or politically exposed persons. This is also compounded by the partisan politics affecting the effectiveness of the PAC to demand accountability from public institutions. Beyond the political economy issues, the public procurement system is not properly integrated with the public financial management and governance oversight frameworks to ensure value for money and transparency. Internal auditors have been excluded from the procurement process, and do not have actionable access to the GIFMIS to investigate or stop suspicious procurement arrangements. Additionally, SIGA has not demonstrated significant interest in the procurement measures of state agencies. These combined with the absence of professional standardization, ethics, and capacity building measures amplify the corruption risk of the existing public procurement regime.